Of negotiated settlements and international economic law

As reports of China, US and EU apparently reaching a settlement on the solar panels trade dispute trickled in, another dispute seems to be making an entry - EU initiating a suo moto anti-dumping and anti-subsidy enquiry into imports of telecommunication equipment from China. 

The EU statement is here:

""The European Commission has today taken a decision in principle to open an ex officio anti-dumping and an anti-subsidy investigation concerning imports of mobile telecommunications networks and their essential elements from China. This decision will not be activated for the time being to allow for negotiations towards an amicable solution with the Chinese authorities. I will revert to the College of Commissioners in due course."

Will this dispute go the negotiated settlement way too? Consultations and negotiations are an integral part of the international trade setting. However, this CATO piece was critical of a negotiated settlement. It highlights the multiplicity of stakeholders - consumers, industry invoked in downstream activities like installation as well as institutional users of these equipments, apart from the producers of these panels ofcourse.

I was just struck by the CATO piece of the usage of the term "un-trade agreement". Can negotiated settlements be contrary to principles of international law? In other words, can there be a settlement that violates the provisions of an Agreement? I am sure countries do it all the time - but strictly in legal terms, isn't it still a violation?

Cuba joins the battle

Cuba is the latest entrant to the Tobacco Plain Packaging dispute with reports that it has sought consultations with Australia on the measure trickling in. Cuba had already reserved third party rights in a WTO dispute that was initiated by Ukraine against Australia. I have blogged about this here, here and here. NYT covered this news recently here.

Interesting facts about the Cuban challenge:

1. It is Cuba's first WTO dispute settlement case - either as a complainant or a respondent

2. Cuba, a developing economy, is challenging a developed economy (Australia) on the grounds that it's intellectual property rights have been allegedly infringed - the use of TRIPS by a developing country against a developed economy (The allegation is that it is normally the other way round)

3. With the Dominican Republic and Cuba joining the challenge, it seems to be a Caribbean battle against plain packaging of tobacco.

While on the one side pubic policy imperatives of public health drive the legislative moves of tobacco plain packaging, impact on local employment in developing economies and its impact on trade and jobs is forcing a legal challenge at the international forum. 

Just another example to show that trade measures are not just about trade - it has a far reaching impact on employment and growth.

Krugman on protectionism

While there are allegations that the protectionist trend across the world is increasing due to sluggish global economy recovery, Paul Krugman believes that as compared to the Great Depression in 1929 countries have not shown a protectionist surge this time around. The chief reason for this, he opines in his NYT op-ed, is the fact that an institutional framework perhaps exists to deal with protectionism:

"So why, exactly, aren’t we seeing more protection? Why aren’t politicians — even conservative politicians — looking at the situation and saying, hmm, a tariff won’t increase the deficit, it won’t involve debasing the currency, but it could clearly help create jobs? 

One answer might be the “Smoot-Hawley caused the Depression” thing; this isn’t true at all, but it might be serving the purpose of a noble lie. 

Or maybe it’s the structure of trade agreements. The countries that arguably could really, really use some protection right now are inside the European Union, so no go. Countries outside still know that any protection they impose will lead to big problems at the WTO; the United States has to know that a protectionist response would break up the whole world trading system we’ve spent almost 80 years building."

I am not so sure that the protectionist trend has subsided. A look at the WTO disputes and proceedings of the various Committee meetings, especially the ASCM, at the WTO indicate that countries continue to impose tariff and non-tariff barriers as well as prohibited subsidies, inconsistent with WTO rules, to protect domestic industry. Perhaps the extent and scope of these measures have lessened over the years.It may be a matter of degree rather than fact.It also depends on what you define "protectionism" as.

Global Supply chains and an international agreement

I have blogged about global supply chains here and here. Richard Baldwin has argued that the present multilateral trade arrangement or WTO 1.0 is incapable of addressing the reality of international supply chains and a need for WTO 2.0 is evident. He has recently written about it in EastAsiaForum here.

In a recent piece in the NYT Paul Krugman referred to the USITC report on the economic effects of significant import restraints. The USITC report explained the nature of global supply chains:

"The Apple iPod is a prominent example of a good produced via a global supply chain. Apple is headquartered in the United States and most of its R&D, marketing, top management, and corporate functions are located in the United States. The iPod’s hard drive, however, was designed in Japan by Toshiba and built in factories in China and the Philippines. The controller chip was designed by the U.S. firm Portal Player, but is produced by firms in either Taiwan or the United States. Other parts are manufactured in Japan, Thailand, Taiwan, Korea, and Singapore. Finally, the iPod is assembled by Taiwanese manufacturing firms in China."

To what extent are global supply chains impacting world trade? Is a large proportion of world trade a result of international supply chains or is it an insignificant percentage? Which are the countries involved in this supply chain? What is the developed-developing country dynamic here? Will it lead to the enhancement of the industrial base of a developing country? What would the nature of an international agreement covering supply chains be? How different would it be from an existing multilateral trade agreement?